E-commerce

HowDell uses e-commerce in developing a strategic advantage to improveits efficiency or market share and create increased profits.

Number:

Contents

Executive summary 3

1. Overview and Current Status of Dell Computer Corporation 5

1.1 Overview of Dell Inc.: 5

1.2 Historical Background of Dell Inc.: 6

1.3 Current Status of Dell Inc.: 7

2. Characteristics of Dell Computer Corporation 7

2.1 Goals, objectives, and mission of Dell Inc.: 8

2.2 Organizational structure of Dell Inc.: 9

3. Strategies of Dell: 10

4. Company strengths, weaknesses, opportunities, and threats: 13

5. Analysis of Dell’s telecommunications 14

7. Conclusions 16

Appendices: 18

List fo Table

Table 1 SOWT analysis of dell Inc. in 2013 13

List of FiguresY

Figure1 Revenue History of Dell Inc. (Dell Corporation, 2014) 6

Figure2 Worldwide Sale in Q-2, 2014 (Dell Corporation, 2014) 7

Figure3 Organizational structure of Dell Inc (Dell Corporation, 2014) 9

Figure4 Comparison of Direct and Indirect sale strategy of Dell Inc. andCompaq 11

Executivesummary

Themove into e-commerce has clearly reignited Dells success story. Afterseemingly losing position as America’s favourite PC brand to Apple,the firm has diversified into software and survived. As PC and laptopsales continue to drop, the firm has turned to e-commerce to improveefficiency in various areas such as supply chain management,marketing customer relations and customer support. This move hasenabled the firm to stick to its philosophy of direct marketing andlow cost approach and competitive pricing to create a niche market.Its current position in the market poses opportunities and challengesthat the firm must utilize and manage respectively. The growth inpopularity of mobile devices namely smart phones and tablets givesthe opportunity very pleasing opportunities for growth in softwaredevelopment and even hardware. The current shift from a publiccompany to a private one can be beneficial or detrimental to the firmin the near future as an American brand. To secure its futuresuccess, it is recommended that the firm should explore creating aunique proprietary network having expanded into telecommunication inorder to address the runaway issue of privacy facing IT ande-commerce today.

,the short form of Electronic commerce is a process of conductingbusiness online. In the developed world, e-commerce has been adaptedvery rapidly with virtual firms such as e-Bay and Amazon gainingglobal recognition (Cohan,2000).This has been facilitated by modern technologies such as computers,internet, electronic money transfer, virtual banks/wallets, email,and electronic data interchange (EDI).is however, mostreliant on the infrastructure comprising of the World Wide Web (www),the internet and internet enabled devices. For this reason Modern has proliferated in markets that have well developedinfrastructure in place as described.

Typically,e-commerce provides a virtual storefront on the websites by creatingan online catalogue for all visitors to the site to see. Besides, itcreates an online marketplace for buying and selling on websites asopposed to the traditional brick and mortar stores. For manytraditional brick and mortar stores such as Wal-Mart and K-mart, theyhave taken up e-commerce as a new avenue for growth, a method toimprove distribution and marketing and also as response to increasingcompetition from e-commerce giants. also allows firms toimprove its marketing and customer relationship efforts throughcollection of demographicdata from site visitors and tracking of sales (Goldstein andO`Connor, 2002). In addition to enhancing end user business,e-commerce is also used for business to business (b2b) selling andbuying that provides a secure business transactions.

TheDell Computer Corporation, famous for its line of quality computersand technology solutions is a leader in e-commerce. Basically, thefirm engages in e-commerce in supply chain management, customerservice, procurement, sales, customer relations, businesscollaboration, marketing, communication, intra-business among otherways. Given the ease and convenience brought in by e-commerce inthese areas, the benefits have been transferred to manufacturingthrough supply chain management where it has adapted &quotconfigureto order&quot or &quotbuild-to-order&quot approach to theproduction or manufacturing for the purpose of delivering individualcomputers in accordance to the customers’ specification (Gates andHemingway, 1999).

TheDell Computer Company was founded in the year 1984 as computertechnology firm. The company develops, repairs, sells and givessupport in products such as computer hardware, software forcomputers, IT services and also offers IT consultation services.Since its formation, the company gained its recognition in thecomputer industry between 1990 and 2000 with growth into the globalmarket. This tremendous growth in this period was partly acceleratedby the formation of the company’s website, which made it berecognized internationally. Additionally, the company increased itsproducts from the computers and laptops to selling internet services,servers and the related wares. In 1999, DellCompany surpassed one of its main rivals in the industry ‘Compaq’to develop into the largest PC maker globally then.

  1. Overview and Current Status of Dell Computer Corporation
    1. Overview of Dell Inc.:

DellComputer Corporation, Dell Inc., is a private computer technologycompany headquartered in Round Rock Texas, USA. Until 2013, thecompany was a public listed company but the founder Michael Dell andprivate equity firm Silver Lake bought back publicly held shares inorder to accelerate the firm’s growth. As a multinational company,it has operations in 34 countries around the world organized intothree geographic regions namely Americas, Asia-Pacific and Japan, andEurope/Middle East/Africa (EMEA). The company employs over 111,300employees globally as at the end of 2013 financial year. This is inspite of a series of layoffs in a bid to streamline the firm. It theglobal PC market, the firm is the third largest PC maker comingbehind fellow American firm HP and China’s Lenovo. Revenues havebeen slumping with 2013 recording $56.9 billion which equates to an8% drop (Dell.com, 2014).

1.2Historical Background of Dell Inc.:

MichaelDell is the founder of this giant computer technology company whoestablished this company in 1984 while he was a University of Texasstudent. Like other famous entrepreneurs such as Bill Gates and SteveJobs, Michael Dell also school dropped out school to pursue businessinterests. Primarily, the name of this company was PC’s Unlimited.His business idea was to buy computers parts and assemble them andsell directly to customers at a lower price.

Figure1 Revenue History of Dell Inc. (Dell Corporation, 2014)

Dellfirst produced the computer in 1985 while the owner got $1000 as thecapital from his family. That computer was totally a reflection ofhis own design which sold for $795 each. Later, the companyadvertised its products in magazines for the purpose of selling thatdirectly to customers. He achieved this through custom assemblingeach customer’s order according to an assortment of options. Healso took up aggressive marketing including direct mail, phone callsand even free trial subscriptions. By the end of 1984, Michael Dellhad made over $6 million in revenue.

1.3Current Status of Dell Inc.:

In2014, Dell Inc. was listed ranked position 51 in the world by Fortune500. In 2013, Dell Corporation was the third computer seller globallybehind the establishments such as HP and Lenovo. It made $56.94billion revenue in 2013. Currently, Dell is the top seller ofcomputer monitors worldwide. In addition, Dell Corporation is the 6thlargest company in the Texas based on revenue.

Figure2 Worldwide Sale in Q-2, 2014 (Dell Corporation, 2014)

  1. Characteristics of Dell Computer Corporation

DellInc. has four major enterprises servers, networking, Quest softwareand desktop and mobility. Although desktop and mobility enterprise,which manufactures PCs, laptops, tablets, monitors and mobile phonesis the largest, it has been facing decreased performance over thelast few years. However, all the other enterprises have beenperforming well. This enterprise approach allows the firm to marketits various products separately. Additionally, the firm has kept tothe tradition of the founder of perceiving PCs as an assembly ofvarious items rather than a unitary product. For this reason,customers can buy a monitor, hard-disk, motherboard, PC casing, powersupply, DVD-Rom, CD-Rom, etc. separately from the store. On the sameidea of tradition, Dell tries as much as possible to eliminate thirdparty dealers and market directly to consumers and in the processretain the prices low. This strategy has been aptly applied andfacilitated by e-commerce as this paper intends to show.

2.1Goals, objectives, and mission of Dell Inc.:

DellInc. has no specific mission statement by a slogan “Listen. Learn.Deliver. That’s what we’re about.” This slogan alone indicatesthe new approach to the market which incorporates tailor made productfor the market. This is very relevant for any customer oriented firmthat seeks to develop products according to observed consumer needs.

Fora vision statement, dell articulates that “Dell is committed tobeing a good neighbor in the communities we call home. We mustcontinue to grow responsibly – protecting our natural resources andpracticing sustainability in all its forms – and improve thecommunities where we live and work through our financial andvolunteer efforts&quot (Dell 2014).

Values

Committo substance. Grow with clarity: the firm aspires to make the rightdecisions in its operations guided only by the right intentionstowards our clients relying on values and standing by actions thefirm takes.

Deliveringresults that make a positive difference: The firm shall strive todeliver products and serves that serve clients in any environment.

Leadingwith openness and optimism: this calls for the firm to be open to newideas from clients and employees and create an open and practicalcommunication platform to facilitate this.

Winingwith integrity: this implies that the firm values operations in anethical legal and sustainable manner supported by creating socialequity by supporting the communities by employing technology invarious ways

Supportpositive growth. Watch the world thrive: commits the firm deliveringtechnology solutions that enable people everywhere to grow and thrive(Dell, 2014)

2.2Organizational structure of Dell Inc.:

DellInc has a functional and decentralized organizational structure. Thecompany has several departments and functional areas that support andenable the company to deliver. The hierarchical structure of thiscompany represents various functional components which includeincluding Business development, education service, and Globaloperation.

Figure3 Organizational structure of Dell Inc (Dell Corporation, 2014)

Usually,a decentralized organizational structure is more flexible and thelearning opportunity is high for the employees. In this structure,decision comes from different departments and various levels,whereas, in a centralized system the CEO is the only one who makesthe decision. The company has the democratic leadership strategy sothat all the department head can participate in the decision makingprocess with the CEO. Prior to privatizing the firm, the firm had aboard of directors led by a chairman. The CEO was answerable to theboard and the board was the chief decision maker. As a technologyfirm, one of the critical departments is the research and development(R&ampD) that also deals with product design and informs managementdecision. Dell has a team of 4,000 highly qualified engineers forresearch and development in its R&ampD department which is arecipient of almost $600m annually (Dell Inc. Company profile, 2005).Therefore, it is clear that Dell always tries to providesophisticated technology to the customers.

  1. Strategies of Dell:

DellInc. usually uses the direct sales strategy. It does not rely on theintermediaries, such as wholesalers, retailers, etc. The company’swebsite is one of the key distribution and marketing avenues thatreinforces its place as a leader in e-commerce. Dell Inc. directlymarkets its product via its website (http://www.dell.com).As a result, the direct sales model provides the company someadvantages. Those are discussed as follows:

  • The company can save a huge amount because intermediaries cannot take the money from the mark-up.

  • As the company does not have any retail store, it does not have to pay the store rent.

  • Dell can maintain the customer relationship and make customer database which provides prompt feedback from the customers and helps to shape its product offerings.

D

Compaq

Retail

Store

End

User

irect (Dell) and Indirect (Compaq) Sales Model

Indirect

C

End

User

Dell

Strategically, going both direct and indirect sales is difficult.

Dell went from$890M in 191 to $2B in 1992 via retail outlets

Direct

Figure4 Comparison of Direct and Indirect sale strategy of Dell Inc. andCompaq

DellInc. uses direct sales strategy which helps the company achievecompetitive advantage in the market. Maintaining a chain of brick andmortar stores would be more expensive for the firm than maintain ahealthy, supportive and interactive website. Besides, isnow becoming very popular to the customers. The advancement ofe-commerce on mobile devices has also pushed e-commerce ahead.

Redefinitionof business model: Dell Company as an Company

TheDell Company became one of the early companies to be enthusiastic inconverting to the internet among the computer producing companies. Itcreated its first website in 1994, after which the company moved someof its business activities such as selling, customer relations aswell as widening its customer base to the internet ahead of itscompetitors. One of the major gains from this approach is that, thecompany gained an advantage in selling online. This was the directapproach in selling compared to the indirect move that was stillpracticed by their key competitors in the industry such as the likesof Apple, IBM, HP and Compaq. In addition, Dell did not have to beconcerned about channel conflict with its product distributors andresellers when it commenced the online selling approach.

Inaddition to the already established company’s ‘build-to-ordermechanized methods’ the company made it easy to reach and offertheir customers the chance to organize products online just as it wasthe case when they were using the telephone as the main connectingtool between them and their customer base. This tremendous gain bothin the company’s performance and sales gains made the company hitthe $50 million sales revenue a day in 2000. Online sales contributedenormously to this value. In addition to making increased salesonline, the company also used the Internet to connect itself to itslarge customer bases all over the globe. This was achieved throughthe development of extranets which were known as ‘Premier Pages’but currently they are known as ‘Premier Dell.com’. Thisincreased their customer bases as well as ordering points notforgetting stations to attend to its customer’s issues (customerservice).

Modernmarket dynamic has seen Dell redefine its e-commerce strategy. Therapid growth in mobility e-commerce has seen the firm venture intothe field with renewed vigor. The firm has launched several dellmobile phone applications based on of Apples IOS , Google’s Androidand Microsoft’s Windows. These applications not only allow the firmto increase sales and communicate with the market but also have abetter understanding of the market and client behaviors. In thefiscal year ending February 2012, the firm recorded 121% growth inmobile revenue followed by 79% following. The firm attributed thisgrowth to redesigning the mobile based sites to include most of thefeatures that are in desktop sites. This way, consumers can accessmore product details and help them in shaping their purchasedecisions.

Thefirm has also increase its presence in the social media scene andalso improved on mobile advertising. Creating healthy and activeaccounts in social media such as Facebook and Twitter allows the firmto interact better with its clients. For instance, the firm has beencommunicating about sales and offers on social media with links toits pages. Social media also provided cheaper advertising optionscompared to conventional media outlets such as TV and newspapers.

  1. Company strengths, weaknesses, opportunities, and threats:

Companystrength, weaknesses, opportunities, and threats (SWOT) analysis arethe compulsory to understand the existing status of the company. Inevery year, Dell Inc. conducts a Swot analysis. SWOT analysis helpDell Inc. to determine its strongest and weakest point, so that thecompany can take decision how to address its position in e-commerce.

Table1 SOWT analysis of dell Inc. in 2013

Strength

Weakness

Dell achieved a massive brand value worth $7.5 billion hence being known as one of the giants in the industry.

Product customization is outstanding

Environmental record is good enough

Dell achieves the competency in the mergers and the acquisitions

The biggest strength of Dell is the direct selling business model

Computer hardware products are unable to meet the expectation.

Dell has a poor customer service

Dell expenses a small amount in R&ampD

Dell has a weak patent portfolio

Dell has a small no. of retail stores

Dell has a low differentiation

Opportunities

Threats

Dell recently introduced services and enterprise solutions businesses

Dell usually obtains most of its patents through the acquisitions.

Strong participation in the emerging markets

Tablet computer market growth is a great opportunity for Dell Inc.

Huge demand of Smart phones is the major challenge of Dell.

Hardware products are causing declines the profit.

Dell has a slow growth in the laptop market.

Dell has to face a massive competition

  1. Analysis of Dell’s telecommunications

DellInc. provides support to the telecommunication industry bytransforming with the industry partnership in the functionvisualization of network, customer success, and new data offering.The company made collaboration with the company name Red Hat tojointly engineer for Network Functions Virtualization (NFV), which isan OpenStack-based Network. Besides, the company also introducedSoftware-Defined Networking (SDN) solutions mainly for thetelecommunications industry and merged with the company named CalsoftLabs for providing NFV and SDN solutions to the telecom operators allover the globe. Dell Inc. also takes the leadership function in theCloudNFV consortium for the purpose of demonstrating and implementingan open, cloud-based NFV model. Recently, the company has declared anew storage solution and server customized for the ‘always on theworld’.

DellInc. could realize the fact that the technology is changing radicallynowadays and the telecommunication industry is facing a tremendouschallenge of technology. It also could understand the necessity forintegrating a multiple proprietary hardware appliances and pooroperational flexibility along with the agility of service quality.Dell Inc. strongly believes that NetworkFunctions Virtualization canbring a solution regarding those issues and it will able to transformthe telecommunications industry by the utilization of a disaggregatedand open cloud-based and data-driven approach. Yet, Dell Corporationhas become the foundation member of CloudNFV which is a consortiumfor the purpose of developing, testing and implementing a cloud-basedNetworkFunctions Virtualization model.Dell Inc. conducted a research and the company is now leading thegroups of CloudNFV, specifically Dell Research, in providingcustomers with their choice and the consistency across multipletechnologies. Moreover, Dell Networking is shipping the product whichis SDN networking- enabled which will help form a solid basis forNetworkFunctions Virtualizationsolutions.

  1. Recommendations:

DellInc. should establish a strong telecommunication network by which thecompany can connect the whole world. The firm recognizes thepotential in mobile connectivity in the near future and key concernsin e-commerce notably privacy. The firms should therefore seek tocreate a secure private network similar to Blackberry’s NetworkOperations Centre (Noc) but unlike Google’s or Apple’s cloudservices that will allow it to have more control on the content thatits device users have. As an established hardware, software andtelecommunications marketer, the firm has the needed resources andfinancial muscle to capitalise on the weaknesses of its competitorsand establish its own secure network.

  1. Conclusions

Toconclude this report, it is clear that Dell’s ownership willgreatly affect how the market performs in the near future. Thisdepends on how the market services the firm’s latest move. At themovement, the firm is receiving favourable responses to its venturein mobile e-commerce. As a firm with proven history in hard ware andsoftware development, there is nothing more needed to prove thespecialty of Dell. Yet, the company should make a plan, which willcover something very big that will help the company dominate thecomputer and telecommunication industry in the end. However, DellInc. is on its way to do that, it needs some more specific plans. Ifthe company can establish this plan, it can largely maximize theprofit and market shares very soon. Additionally, dell Inc. will geta huge competitive advantage because other computer manufacturingcompanies have not expanded into the telecommunication industry sofar.

References

DellCorporation, (2014). Retrieved online on 13 the Nov fromhttp://www.dell.com/

Cohan,P. (2000). E-profit.New York: AMACOM.

Gates,B. and Hemingway, C. (1999). [email protected] the speed of thought.New York, NY: Warner

Books.

Goldstein,A. and O`Connor, D. (2002). Electroniccommerce for development.Paris: OECD,

DevelopmentCentre of the Organization for Economic Co-operation and Development.

Korper,S. and Ellis, J. (2001). Thee-commerce book.San Diego, CA: Academic Press.

Laudon,K. and Traver, C. (2002). .Boston: Addison Wesley.

Rajput,W. (2000). E-Commercesystems architecture and applications.Boston, Mass.: Artech

House.

Rosen,A. (2000). The question and answer book.New York, N.Y.: AMACOM.

Schwerpunktausgabe„E-Commerce/M-Commerce/T-Commerce“. (2003). dermarkt,42(2),

pp.103-103.

Westland,J. and Clark, T. (1999). Globalelectronic commerce.Cambridge, Mass.: MIT Press.

Appendices:

GantChart

Actions

1st week

2nd week

3rd week

4th week

5th week

6th week

7th week

8th week

Course Project Topic Discussion forum

Identification of the selected topic

Identify research question

Research design

Proposal submission

Conceptual framework

Data collection

Data Analysis

Report draft

Proofread

Research Submission

ConceptualFramework:

Telecommunication

Internet

Online store

Website of Dell Inc.

Organizational structure

to improve market share and profit

Consumers Male/Female